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Archive for the ‘Big Government’ Category

President Obama gave his farewell speech last night, orating for more than 50 minutes. As noted by the Washington Examiner, his remarks were “longer than the good-bye speeches of Ronald Reagan, Bill Clinton and George W. Bush combined.”

But this wasn’t because he had a lengthy list of accomplishments.

Unless, of course, you count the bad things that happened. And there are three things on my list, if you want to know Obama’s legacy for domestic policy.

And those three things, combined with his other policies, produced dismal results.

In other words, Obama’s legacy will be failed statism.

Writing for the Orange County Register, Joel Kotkin is not impressed by Obama’s overall record.

Like a child star who reached his peak at age 15, Barack Obama could never fulfill the inflated expectations that accompanied his election. …The greatest accomplishment of the Obama presidency turned out to be his election as the first African American president. This should always be seen as a great step forward. Yet, the Obama presidency failed to accomplish the great things promised by his election: racial healing, a stronger economy, greater global influence and, perhaps most critically, the fundamental progressive “transformation” of American politics. …Eight years after his election, more Americans now consider race relations to be getting worse, and we are more ethnically divided than in any time in recent history. …if there was indeed a recovery, it was a modest one, marked by falling productivity and low levels of labor participation. We continue to see the decline of the middle class.

And Seth Lipsky writes in the New York Post that Obama’s economic legacy leaves a lot to be desired.

Obama’s is the only modern presidency that failed to show a single year of growth above 3 percent… Plus, the Obama economy failed to prosper even though the Federal Reserve had its pedal to the metal. Its quantitative easing, $2 trillion balance-sheet expansion and zero-interest-rate policy all produced zilch. …The recent declines in the unemployment rate are due less to the uptick in employed persons than to an increasing number of persons leaving the labor force.

All these accusation are very relevant, and I would add another charge to the indictment. Median household income has been stagnant during the Obama years. And the data for Obamanomics is especially grim when you compare recent years to what happened under Reagan.

By the way, the bad news isn’t limited to economic policy.

Here’s what Tim Carney of the Washington Examiner wrote about Obama’s cavalier treatment of the Bill of Rights.

The Bill of Rights is a barricade protecting Americans from their government. Part of President Obama’s legacy will be that he inflicted damage on that barricade, eroding freedom of speech, free exercise of religion, the right to bear arms and the right to due process. Through his political arguments, executive actions and political leadership, Obama has taken some of the holes punched by previous presidents and made them broader or more permanent. This means that after Obama leaves office, people will be more easily silenced, killed or disarmed by their own government.

Tim extensively documents all these transgressions in his article. The entire thing is worth reading.

To be sure, there are people who defend Obama’s legacy.

From the left, Dylan Matthews wants readers of Vox to believe that Obama has been a memorable President. And he means that in a positive sense.

Barack Obama is one of the most consequential presidents in American history — and that he will be a particularly towering figure in the history of American progressivism. He got surprisingly tough reforms to Wall Street passed as well, not to mention a stimulus package that both blunted the recession and transformed education and energy policy.

A “towering figure”? That might be an accurate description of Woodrow Wilson, the despicable person who gave us both the income tax and the federal reserve. Or Franklin Roosevelt, who doubled the size of the federal government and wanted radical collectivism. Or Lyndon Johnson, the big spender who gave us Medicare and Medicaid.

All of those presidents changed America in very substantial (and very bad) ways.

Obama, by contrast, wanted to “fundamentally transform” America but instead turned out to be an incremental statist. Sort of like Bush.

And I can’t help but laugh at the assertion that Obama got “tough reforms to Wall Street” Dodd-Frank was supported by Goldman-Sachs and the other big players!

Let’s get back to the Matthews’ article. His strongest praise is reserved for Obamacare.

He signed into law a comprehensive national health insurance bill, a goal that had eluded progressive presidents for a century. …it established, for the first time in history, that it was the responsibility of the United States government to provide health insurance to nearly all Americans, and it expanded Medicaid and offered hundreds of billions of dollars in insurance subsidies to fulfill that responsibility.

I’ll agree that this is Obama’s biggest left-wing accomplishment. I’ve even noted that it may be a long-term victory for the left even though Republicans now control the House and Senate in large part because of that law (and it may not even be that if GOPers get their act together and actually repeal the law).

But I hardly think it was a game-changing reform, even if it isn’t repealed. Government was already deeply enmeshed in the healthcare sector before Obama took office. Obamacare simply moved the needle a bit further in the wrong direction.

Again, that was a victory for the left, just as Bush’s Medicare expansion was a victory for the left. But it didn’t “fundamentally transform” anything.

And here’s his conclusion.

You can generally divide American presidents into two camps: the mildly good or bad but ultimately forgettable (Clinton, Carter, Taft, Harrison), and the hugely consequential for good or ill (FDR, Lincoln, Nixon, Andrew Johnson). Whether you love or hate his record, there’s no question Obama’s domestic and foreign achievements place him firmly in the latter camp.

I strongly suspect that Obama will wind up in the former camp. He was bad, but largely forgettable. At least if the metric is policy.

Let’s close with a couple of observation on the political side.

I’m amused, for instance, that Obama’s bitter that he couldn’t rally the nation behind has anti-gun ideology.

President Obama said his biggest policy disappointment as president was not passing gun control laws, according to an interview CNN aired… Obama was unable to convince Congress to pass legislation that would change those policies, including enhancing background checks and not selling firearms at gun shows and other venues.

And I’m also amused that he believes the American people would have reelected him if he was on the ballot.

Arguing that Americans still subscribe to his vision of progressive change, President Barack Obama asserted in an interview recently he could have succeeded in this year’s election if he was eligible to run.

To be sure, he may be right. He definitely has better political skills than Hillary Clinton, and I’ll be the first to acknowledge that he was better at campaigning rather than governing.

But his victories in 2008 and 2012 were against very weak Republican candidates. And it’s interesting that a hypothetical poll showed him and Trump in a statistical dead heat. Given Trump’s low approval rating, that doesn’t exactly translate into a vote of confidence for Obama.

More important, I shared some hypothetical polling data back in 2013 which showed that Reagan would have defeated Obama in a landslide.

Once again, that’s hardly a sign of Obama being a memorable or transformative President.

And I imagine Reagan would have an even bigger lead if there was a new version of the poll.

For what it’s worth, I think the most insightful analysis of Obama’s legacy comes from Philip Klein. He notes that Obama wanted Americans to believe in big government. But he failed. Miserably.

President Obama entered office in 2009 with the twin goals of expanding the role that government plays in the lives of individuals and businesses and proving to Americans that the government could be trusted to achieve big things. He was only half successful. …the gulf between his promises and the reality of what was implemented dramatically hardened public skepticism about government. …As the Obama epoch wanes, trust in government has reached historic lows. A Pew poll last fall found that just 19 percent of Americans said they could trust the government to do the right thing most of the time — a lower percentage than during Watergate, Vietnam or the Iraq War. …Obama saw himself as the liberal answer to Reagan who could succeed where Clinton failed, putting an optimistic face on government expansion, passing historic legislation and getting Americans believing in government again. …Obama’s failure to repair the image of the federal government as a bungling institution — think of the DMV, just on a much bigger scale — will create enormous challenges for any Democratic successors trying to sell the public on the next wave of ambitious government programs.

This is spot on. I joked several years ago that the Libertarian Party should have named Obama “Man of the Year.”

But given how his bad policies have made people even more hostile to big government, he might deserve “Man of the Century.”

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Last year, I shared some remarkable research from the Organization for Economic Cooperation and Development about the negative relationship between government spending and economic performance.

The economists at the Paris-based bureaucracy looked at data from its member nations (primarily Europe, North America, and the Pacific Rim), discovered that the countries with bigger government experienced less growth, and concluded that there would be much more prosperity if those nations merely reduced government modestly.

So you can imagine what sort of numbers that study would have generated if a few jurisdictions with genuinely modest-sized government, such as Hong Kong and Singapore, were part of the data.

But that’s a separate issue. Today’s topic is about a study from another international bureaucracy. The European Central Bank has new research looking at the impact specifically of excessive pay for government bureaucrats. Here are the key findings from the nontechnical summary at the beginning of the paper.

…there are benefits from government wage bill reform that go beyond the objective of fiscal consolidation. …a rationalisation of government wages and employment policies can generate favourable labour market effects in the medium to longer term through competitiveness and efficiency gains. Competitiveness gains materialise through the spillovers effects of public wage moderation on the determination of private sector wages. …An important aspect of the debate on public wage bill restraint concerns how long such policies can be sustained over time. …Additional margins of short-term adjustment include the moderation of still high public-to-private wages gaps, or a possible continuation of the downsizing trend in public employment, depending on the country-specific situation. …Finally, the paper argues that reforms affecting public sector personnel are most effective and have more sustained effects when the measures implemented are of a structural nature… Some examples are…measures to streamline the size and scope of government.

Wow, an international bureaucracy writing about the economic benefits that accrue if policy makers “streamline the size and scope of government.” Be still, my beating heart!

If you’re a policy wonk, you’ll like the fact that the study is filled with lots of interesting data and charts.

…aggregate data show that the euro area government wage differential with respect to the private sector increased from 20% in 2007 to 25% in 2009, and subsequently fell to 23% in 2014.

Here’s the relevant chart. The blue line, which links to the left axis, shows the degree to which bureaucrats are overpaid compared to the private sector. For the past 10 years, the “pay premium” has been in the 20 percent-25 percent range.

This problem of excessive pay for the bureaucracy has been a growing problem.

…general government compensation of employees grew faster than nominal GDP over the whole 2007-2014 crisis period

Though once the “austerity” era began about 2010, there was a bit of reform to bureaucrat compensation (in Europe, “fiscal consolidation” mostly meant higher taxes, but some spending restraint), particularly in nations that were forced to make changes because investors were becoming increasingly reluctant to lend them more money..

Here’s a chart showing bureaucrat pay as a share of GDP, with the blue bar showing the amount of economic output consumed by government workers in 2010 and the yellow dots showing the level in 2014. Some countries increased the relative burden of bureaucrat compensation and others reduced it, but what strikes me as noteworthy is that Germany and the Czech Republic deserve praise for keeping the burden low (honorable mention for Luxembourg and Slovakia) while Denmark stands out for being absurdly extravagant.

For a longer-term perspective, at least with regards to the size of the bureaucracy, here’s a table showing the share of the population getting a paycheck from government. Fascinating data. I especially like the columns on the right, which show that Ireland, the Netherlands, and the United Kingdom deserve credit for reducing over time the amount of bureaucrats relative to the private sector. The nations that have moved farthest in the wrong direction, by contrast, are Greece (gee, what a surprise), Spain, Portugal, and Finland.

Now let’s get to the meat of the study, which looks at the economic impact of less bureaucracy.

The authors cite some of the existing academic research, much of which focuses on the degree to which excessive pay for the public sector causes economy-wide distortions that make nations less competitive and result in slower growth. Basically, excessive pay for bureaucrats forces private employers to increase pay as well, but in ways that aren’t sustainable based on underlying levels of productivity.

A seminal work Alesina et al. (2002) found that reducing public wage expenditure generates reductions in private wages per employee, which improves competitiveness, increasing profits, investment, and economic growth. …A key argument is that public wage restraint may set in motion a labour market adjustment through the inter-linkages with private wages. …The literature has found robust evidence of significant interrelations between public and private sector wages per employee. A wealth of recent empirical papers provides evidence of a direct causal relationship between these variables. …The empirical literature tends to find that public employment crowds-out private sector employment.

But when fiscal pressures force politicians to cut back on the excessive pay for government employees, this enables the private sector to have pay levels that are consistent with sustainable long-run growth.

The authors share some of their new findings.

…the recent consolidation period has contributed to some competitiveness gains in the euro area, in view of the evidence provided on the partial correction of the public-private wage premium. …Overall, the restraint in public wages directly reduced unit labour cost (ULC) growth in the euro area during the 2010-2014 period. …The existence of distortions in public-private wage gaps…can be particularly harmful for competitiveness given that public sector activities are concentrated in non-tradable sectors, which are less exposed to international competition. …There is evidence that the recent public wage restraint has driven the partial correction of the existing positive public-private wage premium in the euro area.

The authors close by discussing some policy implications.

Well-designed government wages and employment policies and reforms may generate overall economy competitiveness gains and increase the efficiency of the labour market. …public employment adjustments can affect GDP and total economy employment positively if there are large inefficiencies in the government sector… In addition, if a public pay gap exists, the latter positive effect of public wage restraint becomes amplified as labour market inefficiencies are also reduced.

This is helpful research. It’s not often that a government bureaucracy releases a study showing that overpaid bureaucrats hinder overall economic performance.

Though I hasten to add that the study only looked at the macroeconomic effect of excessive pay. As I argue near the end of this video I narrated for the Center for Freedom and Prosperity, the additional problem is that various bureaucracies are engaging in activities that are economically harmful. In the case of the United States, the Department of Agriculture, Department of Education, and Department of Housing and Urban Development would be just a few examples of agencies where programmatic spending surely is more damaging that bureaucrat compensation.

The good news is that the ECB study also recognizes the need for structural reform. That’s why there was a reference to the need to “streamline the size and scope of government.”

The bad news is that politicians don’t care about this consensus.

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With Christmas approaching, people are putting together their lists for Santa Claus.

I’m not sure I’ll find any of these things under my tree, but here’s what I want.

In the joyous spirit of the season, now let’s add to this collection by targeting the Department of Veterans Affairs.

The is the agency that put veterans on secret waiting lists, leading to needless and tragic deaths. And then the bureaucrats awarded themselves big bonuses (nice work if you can get it!).

And the shoddy treatment of America’s former warriors continues. Here are some excerpts from a story in the Daily Caller.

…almost 600 veterans who received dental care may have been infected with HIV or hepatitis. …the VA is notifying 592 veterans who had dental procedures from a particular dental provider… If any veterans test positive for HIV or hepatitis, they can receive free treatment.

Gee, that’s a great deal. You may get a life-altering illness, but the bureaucracy that enabled the illness will give you additional treatments.

Oh, and you’ll be glad to know that the VA dentist who potentially exposed the veterans is continuing to draw a government paycheck.

Instead of being fired, that dentist has been reassigned to an administrative role, despite potentially exposing almost 600 veterans to HIV or hepatitis.

Like I said, nice work if you can get it.

The VA’s penchant for secrecy wasn’t limited to waiting lists. The bureaucracy also has tried to cover up poor performance at dozens of local medical facilities.

Stars and Stripes has revealed the unseemly details.

A veterans group has blasted the Department of Veterans Affairs over leaked internal documents showing dozens of medical facilities performing at below-average levels. USA Today obtained the documents and published them Wednesday, revealing the secret system. The VA had previously refused to make the ratings public, claiming the system is for internal use only. It rates each of the VA’s medical centers on a scale of one to five, with one being the worst. …The worst performing centers are in Dallas and El Paso, Texas, and in Nashville, Memphis and Murfreesboro, Tenn. The documents also show that some medical centers have not improved despite scandals and scrutiny from Congress. The Phoenix VA still sits at a one-star rating despite a 2014 scandal revealing veterans died while waiting for care and that staff manipulated wait-time data there and at other VA hospitals across the country.

You’ll be happy to learn, however, that there were some consequences for the Phoenix division.

In response the malfeasance, neglect, and mistreatment of veterans, the leaders of the VA in Washington decided to punish the local bureaucracy by…well, take a wild guess.

The VA announced last October it plans to allocate $28 million to the Phoenix center in addition to its annual budget.

While these scandals are maddening, they are a distraction from the bigger problem. Simply stated, the core structure of the VA is misguided and the entire bureaucracy should be shut down.

Two of my colleagues, Michael Cannon and Chris Preble, explained the problem in a column for the New York Times.

Even when the department works exactly as intended, it helps inflict great harm on veterans, active-duty military personnel and civilians. Here’s how. Veterans’ health and disability benefits are some of the largest costs involved in any military conflict, but they are delayed costs, typically reaching their peak 40 or 50 years after the conflict ends. …when Congress debates whether to authorize and fund military action, it can act as if those costs don’t exist. But concealing those costs makes military conflicts appear less burdensome and therefore increases their likelihood. It’s as if Congress deliberately structured veterans’ benefits to make it easier to start wars. …The scandal isn’t at the Department of Veterans Affairs. The scandal is the Department of Veterans Affairs.

They proposed an idea which would lead to honest budgeting and make the Department of Veterans Affairs superfluous.

We propose a system of veterans’ benefits that would be funded by Congress in advance. It would allow veterans to purchase life, disability and health insurance from private insurers. Those policies would cover losses related to their term of service, and would pay benefits when they left active duty through the remainder of their lives. To cover the cost, military personnel would receive additional pay sufficient to purchase a statutorily defined package of benefits at actuarially fair rates. …Insurers and providers would be more responsive because veterans could fire them — something they cannot do to the Department of Veterans Affairs. Veterans’ insurance premiums would also reveal, and enable recruits and active-duty personnel to compare, the risks posed by various military jobs and career paths. Most important, under this system, when a military conflict increases the risk to life and limb, insurers would adjust veterans’ insurance premiums upward, and Congress would have to increase military pay immediately to enable military personnel to cover those added costs.

Jonah Goldberg of National Review takes a different approach, but reaches the same conclusion.

He starts by pointing out more bad behavior by the VA.

There is only one guaranteed way to get fired from the Department of Veterans’ Affairs. Falsifying records won’t do it. Prescribing obsolete drugs won’t do it. Cutting all manner of corners on health and safety is, at worst, going to get you a reprimand. No, the only sure-fire way to get canned at the VA is to report any of these matters to authorities who might do something about it. …“Our concern is really about the pattern that we’re seeing, where whistleblowers who disclose wrongdoing are facing trumped-up punishment, but the employees who put veterans’ health at risk are going unpunished,” Special Counsel Carolyn Lerner recently told National Public Radio.

And he then says the only real solution is to eliminate the bureaucracy.

The real fix is to get rid of the VA entirely. The United States has an absolute obligation to do right by veterans. It does not have an absolute obligation to run a lousy, wasteful, unaccountable, corrupt, and inefficient bureaucracy out of Washington. …Imagine that the federal government simply gave all of the VA hospitals to the states they’re in. Instead of the VA budget, Congress just cut checks to states to spend on their veterans. You’d still have problems, of course. But what you would also have are local elected officials — city councilmen, state legislators, mayors, governors, etc. — whom voters could hold directly accountable. …this process would allow everyone to learn from both mistakes and successes in a way that a centralized bureaucracy cannot or will not. Personally, I’d rather see the money spent on veterans go straight to the veterans themselves, in the form of cash payments or vouchers to be used for health care in the private sector.

Amen.

National defense is a legitimate function of the federal government, so that means fairly compensating the people who give service to the country. Especially if they suffer wounds that require short-run or long-run care.

But as both my colleagues and Jonah Goldberg have explained, none of that means we need a cumbersome and blundering (and sometimes venal) bureaucracy.

Donald Trump shouldn’t be figuring out who to pick to head the VA, he should be putting together a plan to get rid of it.

To conclude, I found a nice chart that shows when various departments were created, which I have helpfully augmented by crossing out the ones that I’ve explained should be abolished. As you can see, there is still some low-hanging fruit to go after.

By the way, the White House website says the Small Business Administration has “the status of Cabinet-rank,” whatever that means. I guess it’s sort of like a participation trophy for the SBA.

In any event, I’ve also explained why that useless bureaucracy should be wiped out.

And I guess it’s good news that the Postal Service is no longer part of the cabinet, though that’s secondary to the more important issue of getting the government out of the business of delivering mail.

P.S. The VA also is capable of wasting money in ways that don’t involve premature deaths for veterans, so it’s a full-service bureaucracy!

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While I have great fondness for some of the visuals I’ve created over the years (especially “two wagons” and “apple harvesting“), I confess that none of my creations have ever been as clear and convincing as the iconic graph on education spending and education outcomes created by the late Andrew Coulson.

I can’t imagine anyone looking at his chart and not immediately realizing that you don’t get better results by pouring more money into the government’s education monopoly.

But the edu-crat lobby acts as if evidence doesn’t matter. At the national level, the state level, and the local level, the drumbeat is the same: Give us more money if you care about kids.

So let’s build on Coulson’s chart to show why teachers’ unions and other special interests are wrong.

Gerard Robinson of the American Enterprise Institute and Professor Benjamin Scafidi from Kennesaw State University take a close look at this issue.

…education is important to the economic and social well-being of our nation, which is why it is the No. 1 line item in 41 state budgets. …Schools need extra money to help struggling students, or so goes the long-standing thinking of traditional education reformers who believe a lack of resources – teachers, counselors, social workers, technology, books, school supplies – is the problem. …a look back at the progress we’ve made under reformers’ traditional response to fixing low-performing schools – simply showering them with more money – makes it clear that this approach has been a costly failure.

And when the authors say it’s been a “costly failure,” they’re not exaggerating.

Since World War II, inflation-adjusted spending per student in American public schools has increased by 663 percent. Where did all of that money go? One place it went was to hire more personnel. Between 1950 and 2009, American public schools experienced a 96 percent increase in student population. During that time, public schools increased their staff by 386 percent – four times the increase in students. The number of teachers increased by 252 percent, over 2.5 times the increase in students. The number of administrators and other staff increased by over seven times the increase in students. …This staffing surge still exists today. From 1992 to 2014 – the most recent year of available data – American public schools saw a 19 percent increase in their student population and a staffing increase of 36 percent. This decades-long staffing surge in American public schools has been tremendously expensive for taxpayers, yet it has not led to significant changes in student achievement. For example, public school national math scores have been flat (and national reading scores declined slightly) for 17-year-olds since 1992.

By the way, the failure of government schools doesn’t affect everyone equally.

Parents with economic resources (such as high-profile politicians) can either send their kids to private schools or move to communities where government schools still maintain some standards.

But for lower-income households, their options are very limited.

Minorities disproportionately suffer, as explained by Juan Williams in the Wall Street Journal.

While 40% of white Americans age 25-29 held bachelor’s degrees in 2013, that distinction belonged to only 15% of Hispanics, and 20% of blacks. …The root of this problem: Millions of black and Hispanic students in U.S. schools simply aren’t taught to read well enough to flourish academically.  …according to a March report by Child Trends, based on 2015 data from the National Assessment of Educational Progress (NAEP), only 21% of Hispanic fourth-grade students were deemed “proficient” in reading. This is bad news. A fourth-grader’s reading level is a key indicator of whether he or she will graduate from high school. The situation is worse for African-Americans: A mere 18% were considered “proficient” in reading by fourth grade.

But Juan points out that the problems aren’t confined to minority communities. The United States has a national education problem.

The problem isn’t limited to minority students. Only 46% of white fourth-graders—and 35% of fourth-graders of all races—were judged “proficient” in reading in 2015. In general, American students are outperformed by students abroad. According to the most recent Program for International Student Assessment, a series of math, science and reading tests given to 15-year-olds around the world, the U.S. placed 17th among the 34 Organization for Economic Cooperation and Development countries in reading.

This is very grim news, especially when you consider that the United States spends more on education – on a per-pupil basis – than any other country.

Here’s a table confirming Juan’s argument. It lacks the simple clarity of Andrew Coulson’s graph, but if you look at these numbers, it’s difficult to reach any conclusion other than we spend a lot in America and get very mediocre results.

Juan concludes his column with a plea for diversity, innovation, and competition.

For black and Hispanic students falling behind at an early age, their best hope is for every state, no matter its minority-student poverty rate, to take full responsibility for all students who aren’t making the grade—and get those students help now. That means adopting an attitude of urgency when it comes to saving a child’s education. Specifically, it requires cities and states to push past any union rules that protect underperforming schools and bad teachers. Urgency also means increasing options for parents, from magnet to charter schools. Embracing competition among schools is essential to heading off complacency based on a few positive signs. American K-12 education is in trouble, especially for minority children, and its continuing neglect is a scandal.

He’s right, but he should focus his ire on his leftist friends and colleagues. They’re the ones (including the NAACP!) standing in the proverbial schoolhouse door and blocking the right kind of education reform.

P.S. This is a depressing post, so let’s close with a bit of humor showing the evolution of math lessons in government schools.

P.P.S. If you want some unintentional humor, the New York Times thinks that education spending has been reduced.

P.P.P.S. Shifting to a different topic, another great visual (which also happens to be the most popular item I’ve ever shared on International Liberty) is the simple image properly defining the enemies of liberty and progress.

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Yesterday I shared some very good news about Brazil adopting a spending cap.

Today, I also want to share some good news, though it’s not nearly as momentous.

Indeed, it’s not even good news. Instead, it’s just that some bad news isn’t as bad as it used to be.

I’m referring to the fact that the nation’s capital region used to be home to 10 of the nation’s 15-richest counties.

That was back in 2012, and I viewed it as a terrible sign that the DC area was packed with overpaid bureaucrats, oleaginous rent seekers, and government cronies, all of whom were enjoying undeserved wealth financed by hard-working taxpayers from the rest of America.

Well, now for the “good news.”

Terry Jeffrey has a column for CNS News about the current concentration of wealth in the national capital area.

The four richest counties in the United States, when measured by median household income, are all suburbs of Washington, D.C., according to newly released data from the Census Bureau. …Of the Top 20 richest counties in the nation, nine are suburbs of the city that serves as the seat of a federal government that in fiscal 2016 taxed away $3,266,774,000,000 from the American people, spent $3,854,100,000,000, and ran a $587,326,000,000 deficit.

The reason this awful data is good news (relatively speaking) is that the DC region is now home to “only” nine out of the 20-richest counties rather than 10 out of the 15-richest counties.

Here’s Terry’s list, which I’ve augmented by highlighting the jurisdictions that are home to many of the bureaucrats, lobbyists, and other insiders that are living on Easy Street thanks to the federal leviathan.

I also awarded a star to Los Alamos County in New Mexico since that’s another jurisdiction that has above-average income because of Uncle Sam.

To be sure, not every private-sector worker in these rich counties is a cronyist, lobbyist, or rent seeker, so it’s difficult to accurately say what share of the income and wealth in these various counties is earned and how much is a transfer from government.

But we can say with confidence that the bureaucrats who are over-represented in these jurisdictions get a lot more compensation than their counterparts in the private sector. Chris Edwards has been relentless in his efforts to document excessive pay for bureaucrats.

Since we’re on this topic, let’s enjoy some additional bits of data about the cushy life of our bureaucratic overlords.

In addition to lavish pay, federal employees also receive gold-plated benefits. Most of the money goes for pensions and healthcare, but you’ll be happy to know the feds have also figured out more creative ways of pampering the protected class.

…a variety of federal agencies in a number of locations provide “free” yoga classes to employees. But these classes are not free; since 2013, they have cost taxpayers over $150,000. The State Department spends $15,000 for yoga in the nation’s capital. A yoga instructor in from Berkeley, California is paid $4,000 a year from the Department of Agriculture’s Research Service. Of course, the Department of Energy…has gotten in on taxpayer financed yoga; but for $11,000 annually they also offer pilates at a California location. …The Railroad Retirement Board spends $11,000 annually for yoga classes for office workers at its Chicago headquarters.

And many federal bureaucrats have figured out how to enjoy another fringe benefit of federal employment.

The federal government is full of people pulling in six-figure compensation packages who spend their days…watching porn on government computers… One compulsive porno-phile over at the EPA was watching so much porn that it caught the attention of the Office of the Inspector General — i.e., he was watching so much porn that a federal official noticed — and when the OIG investigator showed up to see what the deal was, you know what that EPA guy did? He kept right on watching porn, with the OIG inspector in his office. At the FCC, bureaucratic home of the people who enforce such obscenity laws as we have, employees routinely spend the equivalent of a full workday each week watching porn. Treasury, General Service Administration, Commerce — porn, porn, and more porn. Of course nobody gets fired. Nobody ever gets fired. …Federal employees, according to OIG reports, also spend a great deal of time browsing online-dating sites (apparently without much success) and shopping.

By the way, the jab about “nobody gets fired” isn’t 100 percent accurate.

But if you want lots of job security, then latch on to the federal teat.

Federal workers are far more likely to be audited by the IRS or get arrested for drunk driving than they are to be fired from the civil service payroll for poor performance or misconduct. The odds are one-in-175 for the IRS audit and one-in-200 for the drunk driving arrest, while the odds for a fed to be fired in a given year are one-in-500, according to the Government Accountability Office. …Private sector workers face just the opposite situation. They have a roughly one-in-77 chance of being involuntarily terminated — the Bureau of Labor Statistics doesn’t distinguish between fires and layoffs — in a given month.

By the way, bureaucrats are sometimes forced into early retirement as “punishment” for misbehavior.

All things considered, though, we serfs shouldn’t complain too much.

After all, would it be proper to grouse about a group that does superlative work?

In the ranks of the federal government, 99 percent are really good at their jobs — and almost two-thirds exceed expectations or do outstanding work. That’s the conclusion of a new report by the Government Accountability Office, which also found that 78 percent of high-level civil servants — those in GS grades 13 through 15 — were given top performance scores of outstanding or fully successful….The glowing picture of everyone in calendar year 2013, the most recent data available to auditors, is…good news for federal agencies.

In reality, of course, these glowing performance reviews are highly suspect.

…a more likely reality to many in and outside of government. Rather than so many federal workers being exceptional, the system for rating them isn’t working right. …Federal workers themselves have long complained in annual surveys that their agencies do not deal with poor performers, hurting morale and efficiency. Lawmakers complain that it is nearly impossible to fire these employees, but bills to take away some of their their rights to appeal bad reviews have languished in Congress. …“Apparently the federal bureaucrats grading one another think virtually everyone who works for the government is doing a fantastic job,” Rep. Jeff Miller (R-Fla.), chairman of the House Committee on Veterans’ Affairs, said in a statement. “But given the dysfunction we’ve seen throughout the federal government over the last several years, that can’t possibly be true,” Miller said.

Of course it’s not true.

Misbehavior and malfeasance at bureaucracies such as the IRS and VA doesn’t prevent high ratings and generous bonuses. Instead, it’s almost as if doing the wrong thing is a job requirement.

Isn’t big government wonderful?

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In the world of fiscal policy, there are actually two big debates.

  1. One debate revolves around the appropriate size of government in the long run. Folks on the left argue that government spending generates a lot of value and that bigger government is a recipe for more prosperity. Libertarians and their allies, by contrast, point out that most forms of government spending are counterproductive and that large public sectors (and the accompanying taxes) undermine economic performance.
  2. The other debate is focused on short-run economic effects, and revolves around the “Keynesian” argument that more government spending is a “stimulus” to a weak economy and that budget-cutting “austerity” hurts growth. Libertarians and other critics are generally skeptical that government spending boosts short-run growth and instead argue that the right kind of austerity (i.e., a lower burden of government spending) is the appropriate approach.

Back in 2009 and 2010, I wrote a lot about the Keynesian stimulus fight. In more recent years, however, I have focused more on the debate over the growth-maximizing size of government.

But it’s time to revisit the stimulus/austerity debate. The National Bureau of Economic Research last month released a new study by five economists (two from Harvard, one from NYU, and two from Italian universities) reviewing the real-world evidence on fiscal consolidation (i.e., reducing red ink) over the past several decades.

This paper studies whether what matters most is the “when” (whether an adjustment is carried out during an expansion, or a recession) or the “how” (i.e. the composition of the adjustment, whether it is mostly based on tax increases, or on spending cuts). …We estimate a model which allows for both sources of non-linearity: “when” and “how”.

Here’s a bit more about the methodology.

The fiscal consolidations we study are those implemented by 16 OECD countries (Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, Portugal, Spain, Sweden, United Kingdom, United States) between 1981 and 2014. …We also decompose each adjustment in its two components: changes in taxes and in spending. …we use a specification in which the economy, following the shift in fiscal policy, can move from one state to another. We also allow multipliers to vary depending on the type of consolidation, tax-based vs expenditure-based. …Our government expenditure variable is total government spending net of interest payments on the debt: that is we do not distinguish between government consumption, government investment, transfers (social security benefits etc) and other government outlays. …In total we have 170 plans and 216 episodes, of which about two-thirds are EB and one-third are TB.

By the way, “EB” refers to “expenditure based” fiscal consolidations and “TB” refers to “tax based” consolidations.

And you can see from Table 5 that some countries focused more on tax increases and others were more focused on trying to restrain spending.

Congratulations to Canada and Sweden for mostly or totally eschewing tax hikes.

Though I wonder how many of the 113 “EB” plans involved genuine spending reforms (probably very few based on this data) and how many were based on the fake-spending-cuts approach that is common in the United States.

But I’m digressing.

Let’s now look at some findings from the NBER study, starting with the fact that most consolidations took place during downturns, which certainly wouldn’t please Keynesians, but shouldn’t be too surprising since red ink tend to rise during such periods.

…there is a relation between the timing and the type of fiscal adjustment and the state of the economy. Overall, adjustment plans are much more likely to be introduced during a recession. There was a consolidation in 62 out of 99 years of recession…, while we record a consolidation in only 13 over 94 years of expansion. …it is somewhat surprising that a majority of the shifts in fiscal policy devoted to reducing deficits are implemented during recessions.

And here are the results that really matter. The economists crunched the numbers and found that tax increases impose considerable damage, whereas spending cuts cause very little harm to short-run performance.

We find that the composition of fiscal adjustments is more important than the state of the cycle in determining their effect on output. Fiscal adjustments based upon spending cuts are much less costly in terms of short run output losses – such losses are in fact on average close to zero – than those based upon tax increases which are associated with large and prolonged recessions regardless of whether the adjustment starts in a recession or not. …what matters for the short run output cost of fiscal consolidations is the composition of the adjustment. Tax-based adjustments are costly in terms of output losses. Expenditure-based ones have on average very low costs.

These findings are remarkable. Even I’m willing to accept that spending cuts may be painful in the short run (not because of Keynesian reasons, but simply because resources don’t instantaneously get reallocated to more productive uses).

So if the economists who wrote this comprehensive study find that there is very little short-run dislocation associated with spending cuts, that’s powerful evidence.

And when you then consider all the data and research showing the positive long-run effects of smaller government, this certainly suggests that the top fiscal priority should be shrinking the size and scope of government.

P.S. I mentioned above that Keynesians doubtlessly get agitated that governments engage in fiscal consolidation during downturns. This is why I’m trying to get them to support spending caps. The good news, from their perspective, is that the government’s budget would be allowed to grow when there’s a recession, albeit not very rapidly. The tradeoff that they must accept, however, is that spending would be limited to that modest growth rate even during years when there’s strong growth and the private sector is generating lots of tax revenue.

Honest Keynesians presumably should yes to this deal since Keynes wanted restraint during growth years to offset “stimulus” during recession years. And economists at left-leaning international bureaucracies seem sympathetic to this tradeoff. I don’t think there are many honest Keynesians in the political world, however, so I’m not expecting to get a lot of support from my leftist friends in Washington.

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To be blunt, I don’t think the World Bank should exist. We don’t need an international bureaucracy to promote economic development in poor nations. Particularly since the policies that we know will work – free markets and small government – oftentimes are hindered by intervention from multilateral institutions such as the World Bank.

For example, I’ve spent the past few days in Vanuatu, where I’ve been fighting against the adoption of an income tax, and I’ve been repeatedly told that the World Bank is one of the groups (along with the Australian Tax Office) urging the adoption of this anti-growth levy. It is both depressing and upsetting that outsiders are seeking to hinder growth in this poor nation, but what really galls me is that World Bank bureaucrats (like their colleagues at other international bureaucracies) are exempt from paying any income tax.

All this being said, my general philosophical hostility (and, in Vanuatu, targeted genuine anger) toward the World Bank doesn’t preclude me from admitting when the bureaucracy does good work. It has played a positive role in helping some nations set up private retirement systems, and it has produced research warning about the link between corruption and complicated tax systems.

Perhaps most laudable, the World Bank every year publishes Doing Business, an index that dispassionately measures the degree to which government policy imposes costs on those who create and operate companies. Indeed, it was just two months ago that I wrote about the most recent issue (mostly to grouse that America is falling in the rankings, so thanks Obama).

All of which puts me in a strange position, because although I have written that the World Bank is my “least despised international bureaucracy,” I never thought I would dedicate an entire column to defending its work.

But a friend formerly known as the Princess of the Levant sent me an article by José Antonio Ocampo and Edmund Fitzgerald, which attacks Doing Business for…gasp…encouraging tax competition.

Since I’m a knee-jerk defender of tax competition (and bearing in mind that the enemy of your enemy is sometimes your friend), I feel obliged to jump into the debate and defend the World Bank’s report.

Here’s the basic argument of Ocampo and Fitzgerald.

…there is a serious flaw in the report’s formula: the way it treats corporate taxation. …The problem is that “regulatory burden,” according to Doing Business, includes…promoting budget-straining tax competition among countries… This may sound like an argument for overhauling Doing Business’ “paying taxes” indicator. But what is really needed is for Doing Business to drop that indicator altogether…when it comes to the paying taxes indicator, the report has things all wrong. Indeed, it runs counter to the global consensus on the need for effective international cooperation to ensure equitable collection of tax revenues, including measures to limit tax avoidance by multinationals and other private firms. A race to the bottom in corporate taxation will only hurt poor people and poor countries. If Doing Business is to live up to its own slogan, “equal opportunity for all,” it should abandon the tax indicator altogether.

Wow. I find it remarkable that leftists openly argue in favor of suppressing information on tax policy because of their ideological hostility to tax competition.

For all intents and purposes, they’re admitting that taxes do matter.

The article also makes some other assertions that deserve a bit of attention. Most notably, the authors repeat the silly claim by some leftists that the way to get more growth is with a bigger government financed by higher taxes.

…taxes that are necessary to fund public infrastructure and basic social services – both of which are critical to enhance growth and employment. Even the report recognizes that, for most economies, taxes are the main source of the government revenues needed to fund “projects related to health care, education, public transport, and unemployment benefits, among others.”

Yet if it’s true that big government stimulates growth, why did the world’s richest nations become rich when government was very small and taxes were largely nonexistent?

Ocampo and Fitzgerald somehow want people to believe that if a little bit of government spending is associated with good economic results, then this somehow means a lot of government must be associated with better economic results.

Maybe somebody should introduce them to the concepts of diminishing returns and negative returns. And once they master those concepts, they’ll be ready to learn about the Rahn Curve. Heck, there’s even a World Bank study I can recommend for them.

Though the authors do raise one semi-decent point. Some of the taxes paid by companies actually are borne by workers. Ocampo and Fitzgerald don’t seem to understand how this works since they jumble together some taxes that are borne by labor with other that are borne by capital, but there is a kernel of truth in their argument.

Doing Business exaggerates the tax burden on companies. For one thing, it considers all the kinds of taxes firms might pay – not just corporate income tax. Specifically, the report’s estimates for “total tax rate as a proportion of profits” include taxes for employees’ health insurance and pensions; property and property transfers; dividends, capital gains, and financial transactions; and public services like waste collection and infrastructure. Those are taxes that should be categorized as social contributions or service charges.

Having bent over backwards to say something nice about their article, let’s now close by highlighting the most preposterous assertion in their piece.

They basically reject the entire field of microeconomics and the underlying principles of price theory – not to mention reams of academic evidence – by denying that tax rates have any impact on behavior.

…the assumption underpinning it – that low corporate taxation promotes growth – does not withstand scrutiny. Research conducted by the International Monetary Fund and others indicates that tax competition does not promote productive investment worldwide.

Remarkable. They even think citing the IMF somehow strengthens their case, when that’s actually more akin to citing Dr. Kevorkian.

P.S. Just in case anyone is worried that this pro-Doing Business column means I’m getting soft on the World Bank, rest assured that I will never be a fan of a bureaucracy that equates higher taxes with a good report card. But I’ll always be the first to admit when an international bureaucracy does good work.

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